Dr John Small: Commerce Commission Chair explains why they won't be investigating the cost of flying

The Commerce Commission has confirmed it will not be formally putting the cost of flying under the microscope.

Rangitata MP James Meager has suggested the Government could help keep fares competitive by supporting regional airlines.

It's been revealed some flights to Pacific Island nations are cheaper than certain trips within New Zealand.

Commission Chair Dr John Small says flying short routes with low demand is very expensive.

"There's no law against charging high prices - that's the reality of things in New Zealand. If it's a monopoly - on a monopoly route - it's potentially able to be regulated."

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Episode Transcript

Speaker 1 (00:00):
Now the Commers Commission, the Commas Commission, has said it
will not conduct a market study into domestic air travel.
This is of course been a topic of conversation a
lot lately the price of air New Zealand tickets. There
have been calls for a study and so doctor John Small,
the chair of the Commers Commission, has pinned in an
opinion piece on this today and he's with us. Now,
Hey John, Hey, good assening, Heather, John. So take it

(00:22):
from your opinion piece that basically the reasons that you're
not going to intervene is number one, it's expensive to
fly a plane. Number two, it's even more expensive to
fly a plane on regional routes. So nobody wants to
compete in number three in the parts where it really matters,
like the big the big jet flights, they've got competition.
Is that about right?

Speaker 2 (00:38):
That's a reasonable summary year. But also I think you know,
at the moment competition on the main trunk lines is
a bit hand put by by the fact that their
intet's got a bunch of planes that are out of service.
But yeah, generally speaking, that's right. It's very expensive to
fly to fly regional routes that are quite sure and
don't have a lot of demand on them.

Speaker 1 (00:59):
Okay, So the allegation that's been laid at the feed
of a New Zealand at the moment is basically that
it's jacking up its prices on those big on the
domestic routes in order to make more money. Is that fair?
Are they allowed to do that?

Speaker 2 (01:13):
Well, there's there's no law against charging high prices. That's
that's the reality of things in New Zealand. If it's
a monopoly on a monopoly route, it's potentially able to
be regulated, but that would require quite a bit of
investigation to make sure that you weren't you weren't overreaching

(01:34):
to do that. And that's not really that's not really
a competition issue. That's a regulatory issue. So from the
point of view competition, you know, we're not we're not
particularly happy with what we see. We're keep still still
keeping a really close eye on it. But there's nothing
that we saw that's kind of warrant effort that would

(01:56):
go into a market study to I mean, we've already
found out a few things that are going to be
helpful and so yeah, our viewers that will keep a
close eye on it and see how it develops.

Speaker 1 (02:11):
Wouldn't do in New Zealand have a monopoly on most
of the regional routes.

Speaker 2 (02:17):
Well, there's some regional routes that don't fly, and that's
part of the issue that people have been complaining about
them with drawing services on routes that are and you
have to assume that those routes are unprofitable otherwise that
still be there. But yeah, I mean that's so there's
some routes where there are a monopolists. There's some routes
where smaller airlines are a monopoly, and there's been plenty

(02:38):
of I mean, there's a reason I'm out of coverage
about particular smaller airlines. Even when they're flying monopoly routes,
they're really struggling.

Speaker 1 (02:46):
So on the monopoly routes, is there a case to
be made for regulation there?

Speaker 2 (02:52):
Potentially, But that's a different matter to a market study,
which is a competition issue. So as I say, we're
still looking at this. We talked to the airport's pretty
pretty soon to get some more information from them. It's
not a there's not a once and for all things.
This is where we are at the moment.

Speaker 1 (03:10):
Why did you decide to write this. What made you
write the editorial?

Speaker 2 (03:14):
We thought it'd be a good idea. Well, we did
the work first of all, because we are always looking
for ways to improve competition, and market studies are at
all for that. So I thought, okay, that seems like
this a bit of an issue here, let's have a
good look. So we've got a really cracked team together
for about a month or so and had a good
look at it, and then we thought, well, let's put

(03:36):
it out there so people know what we.

Speaker 1 (03:37):
Found and were you feeling Were you feeling like you
were being criticized for not doing it? It felt like
you had to come to your own destroy fens of it.

Speaker 2 (03:44):
No, no, not at all. No. But I mean we're
allowed to initiate market studies on our own volition or
the government can tell us to so they could still
tell us if they wanted to so, but we're always
looking for ways to improve competition. So that's the reason
we looked at that, And having looked at that, thought
might as we tell people, John, it's.

Speaker 1 (04:06):
Good to talk to you, thank you for your time.
I really appreciate it. That's doctor John Small, the chairperson
of the Commerce commissioning. For more from Heather Duplessy Allen Drive,
Listen live to news talks.

Speaker 2 (04:15):
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